Germantown keeps perfect bond-rating grades

Germantown officials were hoping that the city would hold onto its perfect bond rating.

It did.

Moody's Investors Service finds that Germantown continues to be a "solid Aaa." Standard & Poor's Ratings Services cited impressive management and graded the city a "top-tier AAA rating."

Both bond rating agencies gave the suburban city the highest possible score -- a Triple A rating.

Germantown is among only 31 cities in the nation that have earned Triple A ratings from two major bond rating agencies. It is the only city in Tennessee with the distinction. Other cities, like Franklin and Brentwood, both Nashville suburbs, have a Triple A rating from only one of the agencies.

Moody's first rated Germantown with its top score in 1987. Standard & Poor's followed with a perfect rating in 1994.

"I guess we were a little apprehensive given the overall national and state economy," City Administrator Patrick Lawton said. "We never take it (the city's high score) for granted. Every time we ask for an evaluation, they do a critical analysis of the city and our ability to repay the debt. They put you through the wringer."

The Board of Mayor and Aldermen will decide Monday night which investment banker's bid offers the city the lowest interest rate.

Similar to a credit rating for individuals who want to buy a house or a car, a perfect score in bond ratings garners governments better terms when borrowing.

"Germantown is in a very elite group," said Valesa Johnson with Public Financial Management (PFM) in Memphis. "They have a perfect score. It's like having 850 for an individual credit rating."

PFM's project manager Marlin Mosby is handling Germantown's bond sale. Mosby said he's expecting three to four bids instead of the normal six to eight bids. "In a Triple A rating like Germantown's, we would expect an interest rate slightly under four percent. If it were a double A credit, like Memphis or Nashville, which is the next highest rating, it would probably be 4.25 percent. A single A rated credit typically would be over five percent," Mosby said. Nowadays, he added, "The (interest rate) spreads are larger than I've ever seen, and I've been in the bond business for almost 40 years. The markets are just in horrible shape."

From a bond market perspective, Germantown's $5 million bond sale is considered a small one. Explained Mosby, "The odds of them (Germantown) getting into financial trouble are almost nonexistent."